Seagate 2011 Annual Report Download - page 106

Table of Contents
SEAGATE TECHNOLOGY PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ordinary shares. As of June 29, 2012 there were approximately 4 million ordinary shares available for issuance under the ESPP.
i365, Inc. 2010 Equity Incentive Plan (the "i365 Plan").
In October 2010, i365, Inc. ("i365"), a wholly owned subsidiary of the Company,
adopted the i365, Inc. 2010 Equity Incentive Plan (the "i365 Plan"). A maximum of 5 million shares of i365's common stock are issuable under
the i365 Plan. Options granted to employees generally vest as follows: 25% of the options on the first anniversary of the vesting commencement
date and the remaining 75% proportionately each month over the next 36 months. Options expire ten years from the date of grant. During fiscal
year 2011, the Company issued options for the purchase of approximately 4 million shares of i365 common stock with an exercise price of
$1.59, respectively. As of June 29, 2012, there were approximately 1 million shares of common stock available for issuance under the i365 Plan.
The compensation expense associated with options granted to date under the i365 Plan is not material for fiscal year 2012 or 2011.
Determining Fair Value of Seagate Technology Stock Plans
Valuation and amortization method —The Company estimates the fair value of stock options granted using the Black-Scholes-Merton
valuation model and a single option award approach. This fair value is then amortized on a straight-line basis over the requisite service periods
of the awards, which is generally the vesting period or the remaining service (vesting) period.
Expected Term —Expected term represents the period that the Company's stock-based awards are expected to be outstanding and was
determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting
schedules and expectations of future employee behavior as influenced by changes to the terms of its stock-based awards.
Expected Volatility —The Company uses a combination of the implied volatility of its traded options and historical volatility of its share
price.
Expected Dividend —The Black-Scholes-Merton valuation model calls for a single expected dividend yield as an input. The dividend yield
is determined by dividing the expected per share dividend during the coming year by the grant date share price. The expected dividend
assumption is based on the Company's current expectations about its anticipated dividend policy. Also, because the expected dividend yield
should reflect marketplace participants' expectations, the Company does not incorporate changes in dividends anticipated by management unless
those changes have been communicated to or otherwise are anticipated by marketplace participants.
Risk-Free Interest Rate —The Company bases the risk-free interest rate used in the Black-Scholes-Merton valuation model on the implied
yield currently available on U.S. Treasury zero
-coupon issues with an equivalent remaining term. Where the expected term of the Company's
stock-based awards do not correspond with the terms for which interest rates are quoted, the Company performed a straight-line interpolation to
determine the rate from the available term maturities.
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